MSC Continues To Fight Tough Industrial Economy As Daily Sales Slide

E-commerce topped 59 percent of total sales in Q4, while sales to manufacturing customers continued its long-standing decline. CEO Erik Gershwind commented on the market challenges MSC faced in its now-completed fiscal 2016 and on the outlook going forward.

MSC Industrial — No. 13 on Industrial Distribution's 2015 Big 50 List — reported its 2016 fourth quarter and full year fiscal results on Tuesday, highlighted by an overall Q4 sales gain while daily sales continued to decline amid challenging market conditions.

The company posted Q4 total sales of $745.1 million, up 2.4 percent year-over-year, but down 3.5 percent on an average daily sales basis as Q4 had four more selling days than the same period in 2015. By month in Q4, daily sales declined 4.6 percent in June, 4.8 percent in July and 1.8 percent in August.

Here are MSC's sales for its Fiscal 2016 — which began in September 2015 — along with how average daily sales differed from a year earlier. Daily sales have decreased year-over-year each month since June 2015.

  • September '15: $279.3 million (-1.2 percent from a year earlier)
  • October '15: $225.0 million (-3.4 percent)
  • November '15: $202.5 million (-5.9 percent)
  • December '15: $227.9 million (-1.6 percent)
  • January '16: $224.3 million (-5.5 percent)
  • February '16: $231.9 million (-2.3 percent)
  • March '16: $280.7 million (-4.9 percent)
  • April '16: $225.6 million (-2.3 percent)
  • May '16: $221.2 million (-4.2 percent)
  • June '16: $265.2 million (-4.6 percent)
  • July '16: $200.3 million (-4.8 percent)
  • August' 16: $279.6 million (-1.8 percent)

The company also noted that it had daily sales of $266.9 million in September '16, with daily sales down 4.5 percent, while October total sales were estimated at $219.6 million, with daily sales down 2.4 percent.

Q4 profit of $61.8 million was up 4.8 percent year-over-year.

For the full year 2016, total sales of $2.86 billion were down 1.6 percent from 2015, while profit of $231.2 million was essentially identical to 2015's $231.3 million.

"Conditions remained very difficult throughout the fourth quarter, much as they have for the past few quarters," said MSC president and CEO Erik Gershwind in the company's fiscal report. "Low oil prices and the strong U.S. dollar continued to depress demand, particularly in metalworking and heavy manufacturing."

The company's e-commerce sales made continued modest growth in Q4, representing 59.1 percent of total sales. That's up from 58.6 percentin Q3, 57.8 percent in Q2 and 57.0 percent in Q1.

The company said e-commerce comprised 58.6 percent of total sales in Q3, up from 57.8 percent in Q2 and 57.0 percent in Q1. E-commerce represented 58.2 percent of sales for the full year.

By customer type, 67 percent of MSC's Q4 sales were to manufacturing and 33 percent were to non-manufacturing. Average daily sales to manufacturing customers were down 6.1 percent, following declines of 6.8 percent in Q3, 5.6 percent in Q2 and 4.9 percent in Q1. Meanwhile, daily sales to non-manufacturing customers increased 3.3 percent in Q4, following gains of 2.6 percent in Q3 and Q2 and 1.3 percent in Q1.

By geography, MSC's Q4 sales declined in all five regions for a second straight quarter:

  • Midwest: -6.0 percent (-6.3 percent in Q3)
  • Northeast: -1.1 percent (0.8 percent in Q3)
  • Southeast: -3.6 percent (-2.6 percent in Q3)
  • West: -0.4 percent (-4.3 percent in Q3)
  • International & Other: -11.1 percent (-13.0 percent in Q3)

MSC's total headcount of 6,462 at the end of Q4 was essentially unchanged from Q3, but down 2.7 percent from the end of Q4 2015. MSC ended Q4 with a total field sales headcount of 2,301, up 37 from Q3 and down 76 from a year earlier.

"As we look to fiscal 2017, MSC is well positioned regardless of what happens in the industrial economy," Gershwind said. "Should conditions improve or even just stabilize, the company is poised for a tremendous growth and leverage story. On the other hand, if difficult conditions persist, we will continue to capitalize on the opportunities a challenging environment creates for MSC, making the future growth and leverage story even more compelling."

MSC said it expects Q1 2017 average daily sales to decline roughly 3.5 percent at the midpoint.

MSC celebrated its 75th anniversary throughout 2016, and in September it unveiled a new logo and overall rebranding. The company shortened its name from MSC Industrial Supply to just MSC, with a new tagline of "Built to Make You Better," which it said more accurately reflects its efforts. Read MSC's rebranding story in ID's blog here.

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